Heineken And China Resources Sign Agreements To Join Forces In China

Heineken N.V. (HEINY) said that it has signed definitive agreements with China Resources Enterprise, Limited or 'CRE' and China Resources Beer (Holdings) Co. Ltd. or 'CR Beer' to create a long-term strategic partnership for Mainland China, Hong Kong and Macau.

Under the partnership, Heineken will become CRE's 40% minority partner in holding company CRH (Beer) Limited or 'CBL', which controls CR Beer.

Completion of the strategic partnership between HEINEKEN, CRE and CR Beer and the Company Transactions are subject to customary and applicable approvals. If regulatory approval is successfully obtained, the transaction is expected to complete in 2019. Further announcements will be made as and when appropriate.

As part of the strategic partnership, HEINEKEN China's current operations will be combined with CR Beer's operations and HEINEKEN will license the Heineken brand in China to CR Beer on a long-term basis.

Under the strategic partnership agreement, HEINEKEN will be CRE's exclusive partner for international premium lager beers in China. HEINEKEN and CR Beer will investigate which other premium brands from HEINEKEN's portfolio can be licensed to CR Beer in China.

HEINEKEN and CRE will also investigate if the Dutch brewer's global presence and marketing capabilities can be leveraged to support and accelerate the international growth of CR Beer's Snow® brand and its other Chinese brands to become the Chinese beers of choice.

HEINEKEN will acquire a shareholding of 40% in CBL and CRE will own the other 60% in CBL. The Partnership will be governed by a shareholders agreement. CBL holds a controlling interest of 51.67% in CR Beer, a company listed on the Main Board of The Stock Exchange of Hong Kong Limited, operating the beer business in China.

Post completion of the transaction, HEINEKEN will have an effective 20.67% economic interest in CR Beer and will accordingly expect to get representation on the board of CBL and of CR Beer. HEINEKEN will invest a total amount of HK$24.3 billion in CBL, which translates into an implied purchase price of HK$36.31 per share in CR Beer.

CRE will acquire 5.2 million Heineken N.V. shares (equivalent to a 0.9% shareholding in Heineken N.V.) which are currently held in treasury for a total consideration of €464 million or €88.66 per share.

HEINEKEN will contribute its operating entities in China, including three breweries, into CR Beer for a total consideration of HK$2.4 billion, through a share sale transaction.

Combined, these transactions will result in a net investment of €1,948 million (at exchange rates on 3 August 2018) by HEINEKEN.

HEINEKEN and CR Beer will enter into a Trademark License Agreement (TMLA) for the Heineken brand in China. HEINEKEN and CR Beer also signed a Framework Agreement to govern the use of other premium brands owned by HEINEKEN which may be licensed to CR Beer in China, as well as to allow CR Beer to leverage HEINEKEN's global distribution channels to support and accelerate the international growth of CR Beer's Snow brand and its other Chinese brands.